Adams Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 3 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 3 years, by conducting some research online, Adams has developed the following estimates.
Adams Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 3 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 3 years, by conducting some research online, Adams has developed the following estimates.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Adams Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 3 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 3 years, by conducting some research online, Adams has developed the following estimates.
|
Engine Overhaul
Estimated |
Probability
Assessment |
||
|---|---|---|---|
| $360 | 10% | ||
| 550 | 30% | ||
| 800 | 50% | ||
| 720 | 10% |
How much should Adams Bowie deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 3 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
| Deposit amount |
$
|
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